With a background in economics and public policy, I've covered domestic and international energy issues since 1998. I'm the editor-in-chief for Public Utilities Fortnightly, which is a paid subscription-based magazine that was established in 1929. My column, which also appears in the CSMonitor, has twice been named Best Online Column by two different media organizations. Twitter: @Ken_Silverstein. Email: ken@silversteineditorial.com

Royal Dutch Shell is changing lanes. While oil development will continue to dominate its portfolio, the energy developer is now making plans to invest heavily in liquefied natural gas, or LNG. Shell, and others, see the export of the super-cooled natural gas as a lucrative venture.

The tea leaves would tend to indicate that the transportation sector will increasingly fill up using natural gas: LNG is best with heavy duty trucks while compressed natural gas, or CNG, is used to power passenger vehicles and corporate fleets. The momentum, however, will be slow mainly because of a nascent infrastructure that would support such changes. But some high profile public and private players are working on that, and are expecting success.

“As global demand for transportation fuel increases, including LNG, Shell is well positioned to meet this demand,” says Marvin Odum, president of Shell Oil Company. “LNG will be a welcome addition to Shell’s portfolio of quality transportation fuels.”

What’s Shell up to? It is working with Wartsila North America to develop larger engines that could run on the fuel. It is also joining with Westport Innovations to co-market the need for new LNG-fueled trucks as well as partnering with GE’s transportation division to assist the rail industry in building locomotive engines that can function on both diesel and LNG.

As for Shell, this year marks the first time that its natural gas production exceeded that of its oil development. Shell says that it expects the global demand for LNG to double to 400 million tons by 2020 and to potentially as much as 500 million tons by 2025.

Meeting this demand will require an industry investment of $700 billion. Right now, Shell has 22 million tons on stream today that is being manufactured in Australia, Indonesia and North America. It is also working with China, South Africa and Ukraine to help those nations maximize their natural gas potential.

The selling point is that natural gas used for transportation cost 25 percent less than petroleum. It’s also cleaner. Consider Weld County, Colorado: It says that it received its first LNG truck in July 2012 and that it has already realized a 22 percent reduction in fuel costs, or $25,000 a year in fuel savings per truck, according to a news story in the Northern Colorado Gazette.

“Right now, it is costing us 20 percent less per mile to run our LNG trucks versus our diesel trucks,” Jay McDonald, a country supervisor, told the paper.

Clean Energy Fuels is a champion of LNG, saying that it costs the equivalent of a $1.50 gallon. The company now has 75 LNG fueling stations but it is in the process of doubling that. As such, it is working with GE to achieve just that.

Clean Energy is buying two LNG plants from GE Oil and Gas., which will provide $200 million in financing. The facilities, which will supercool the natural gas so that it can be transported to the filling stations, are expected to be operational by 2015. They will supply 250,000 gallons per day, or enough to fill 28,000 trucks, says GE.

Both Clean Energy and GE say that the existing market provides a gauge. They point to Fed Ex and to UPS, which are using increasing amounts of compressed natural gas (CNG). They also note that Waste Management has announced that it will use CNG for 80 percent of its new trucks that haul trash. Once those entities start saving money, the partners argue that their competition would have no choice but to make similar business choices.

While CNG is primarily used in cars, buses and smaller trucks, the LNG that is getting rolled out at Clean Energy’s fueling stations is targeting long-haul, heavy-duty trucks, which will have the advantage of longer driving ranges while not impacting tractor weight and incremental costs, says the company’s release. In 2013, four major manufacturers will introduce a 12-liter LNG engine, which is the optimum size for heavy-duty 18-wheeler trucks.

“As the long-haul trucking industry begins its transition to natural gas, it will be critical to have a reliable supply of LNG,” says Andrew Littlefair, who spoke to this reporter via a conference call.

Cost, of course, is a major consideration. Here, the American Trucking Association is working with U.S. lawmakers to help subsidize this conversion. President Obama is in favor of using government’s levers to help make the transition to cleaner burning fuels but the fiscal hawks say that taxpayers cannot afford it.

What else may block the road? Chemical makers are concerned that an increased demand for natural gas at home and from abroad would drive up their cost of doing business while environmental groups are worried about excessive and harmful drilling. The Obama administration is signaling that it will allow U.S. natural gas, or LNG, to be exported while also saying that the controversial “fracking” techniques can be properly regulated.

“I’m not going get out my crystal ball and say when this will move into the passenger vehicle market will occur,” says Littlefair. “It starts with fleets. The same thing will happen in trucking. But it will take a while to filter through the system. It will be very manageable. So, you can build both power plants and supply transport without significantly affecting prices.”

It would appear that all roads lead to a natural gas-fueled transport sector. But a number of blockades line the route, namely the widening of infrastructure and the cost of conversion. Things will evolve, although the pace of change will be slow and will track the retirement of existing fleets.

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Advantages: 1. 25% reduction in CO2 emissions: 750,000 tons per year 2. 60% reduction in federal fuel cost: $750 million per year 3. Reduction in imported oil: 7 million barrels per year 4. 40,000 man years US employment 5. Installation of enough CNG filling stations to make CNG practical for private vehicles. (4 stations in each congressional district and one every 100 miles along the Interstates). 6. This program uses existing proven commercially available technology that is shovel/wrench ready.

We can do it now. Iran has converted 23% of its cars to CNG. So can we.

CNG burns so cleanly, it is possible to extend oil changes out to 30,000 to 50,000 miles safely. Other maintainence such as injectors, pumps, seals and filters can also be extended. Significant long term savings.

Germany, Italy, Denmark and other European countries are well on the way to methane power. Most European manufacturers offer OEM bi-fuel engines in their line-ups and are expanding available models. There is a very strong after market for CH4 conversions. Bi-fuel engine vehicles can run on either petroleum or CNG at the flip of a switch.

Germany in particular is making a strong effort to convert their transportation fuel needs to low cost, clean, safe methane. Since 2005 they have installed over 5,000 CNG filling stations—in a country about the size of Missouri and Iowa combined.

Methane(CH4) is both a fossil fuel and a biofuel. It can be produced low tech, easily and inexpensively from any type of biomass at all—-even sewage and landfills. Germany originally set a goal of producing 20% of their CH4 usage by the year 2020…………………..however, at the current rate of increase they will meet and exceed this goal by 2015. And this is in addition to rapidly increasing demand as a transportation fuel—–and to replace nuclear power that is being phased out.

The left over waste products of producing CH4 by anaerobic digestion is compost and clean water. Both valuable commodities in themselves. We need to treat sewage anyway.

Existing fleets need not be retired—-any internal combustion engine can run on methane. Most conversions are bi-fuel.

Very good article, informative and covers all the major issues. Thanks for posting this Ken.

Thanks for your comment! People need to start talking to their dealers, and friends in the automotive industry. It is shameful that only the Honda Civic sedan is available, and it only as a CNG only version. Dodge is the only one that makes a pickup on its own line, and only heavy duty. Ford anc Chevy only make heavy duty also, and not on their own line. This technology is well known all over the world. Fiat and GM make several CNG models in other countries, as does Volkwagen and several other manufacturers. Many governors are asking Detroit to make CNG and bifuel models available for their states, and are getting them, but they are not being offered to the public.

30K-50K miles an oil change? Do you have anything to back this claim? The pistons go up and down in engine, the oil prevents friction. If the engine is doing 5400 RPM’s (revolutions per minute), then those little pistons are pumping the same amount regardless if your burning gas, natural, or even moon shine in the engine. 5400 rpm’s is 5400 any way you slice it and any way you feed it.

Jay F—–petroleum contains large amounts of acid forming componenets—-primarily sulphur, chlorine and bromines. Cooked in over millions of years of contact with the earth at high temperatures and pressures.

When the petroleum fuel is burned, these components are released as free radicals that combine with the water vapor formed(by the oxidation of the hydrogen in the hydrocarons) to produce acids. The same process tha

25% is a very conservative savings estimate. It should be more like 33%

Natural gas is the future of energy. It is replacing dirty old coal plants, and dangerous expensive nuclear plants. It will fuel cars, vans, buses, locomotives, aircraft, ships, tractors, air conditioners, engines of all kinds. It costs far less. It will help keep us out of more useless wars, where we shed our blood and money. It is used to make many products. It lowers CO2 emissions, over 3,500 natural gas story links on my free blog. An annotated bibliography of live links, updated daily. The worldwide picture of natural gas. ronwagnersrants . blogspot . com

Would also like to see short range fleets converted to electric/solar. Think short range predictable routes like postal delivery. (Who’s drivers leave their gas vehicles idle as they walk between suburban homes.) And the kind of high torque heavy lifters you’d find at rail and shipping depots. Lots of warehouses that could host acres of panels that would substantially reduce expenses, emissions, and energy consumption.

Why solve our current problems with oil with another non renewable natural resource when there are renewable natural resources like hemp oil? This is a method that is proven to work and sustainable forever. Not to mention the multitude of other things that hemp can make besides oil like building materials, paper, etc. All while maintaining a much better carbon footprint in the manufacturing process.

While also saying that the controversial fracking techniques can be properly regulated??? Please, Obama, don’t make me laugh. The only way those gas-fracking-idiots are able to do this safely is by drilling a great big gaping hole in every safe water regulation there is. All across the country you’ve got poisoned aquifers. And that’s nothing compared to the millions, or should I say, billions of gallons of radioactive toxic chemical waste that has to be disposed of. These “fracking” idiots have been dumping this toxic slop right into the very rivers and streams that supply our drinking water. They also inject it into the ground. Dump it into the Gulf. (Yum yum, those little fishes sure taste good.) Let in sit in ponds the size of football fields. (I’d bet my life that the toxic slop that doesn’t evaporate is left right where it is to do maximum damage in the future.) And God only knows what other kinds of cost-cutting schemes these fracked out idiots got going to maximize profits. We should be looking at the next generation of bio-fuel made from Algae. And we already have engine tech that runs on any kind of fuel and gets 100+ mpg. Of course that was left to rot after winning 1st prize in a NASA competition back in 2001 or 2002. But the Russians decided to use it after stealing it from the American who invented it. Our best are left to rot cuz they don’t shovel millions into the pockets of bought & paid for Washington criminals. Next the Defense Dept. / NASA is going to make Rossi’s e-cat vanish into thin air. What a joke this country is.

Nice story Ken. I recently wrote about a company (link below) here on Forbes called Landi Renzo. They’re one of the leading companies making LNG conversions in fleets. The way they desctibe it, the process is fairly straightfrorward but costs still need to come down. So as you stated, change will come slowly (unfortunately).

I think the article is spot on. The transportation and commercial NG industries will proceed consumer adoption. Although cars can be converted to run on CNG it is expensive to convert and presents compromises many consumers will not accept like loss of truck space, loss of horsepower and MPGs. CNG is 130 octane which requires a compression ratio of 12 to 13 to extract all the energy. Gasoline has an octane around 87 and runs in an engine with a compression ratio in the low 9s. A gas engine converted to run on CNG will run but you will see a loss of horsepower (10-15%) and loss of MPGs (~12% city / 7% highway). Honda did change the compression ratio on the dedicated Civic CNG so you do not lose MPGs but you do lose truck space. I consider the recently released heavy duty pickups to be commercial vehicles. With most of those you lose bed space along with horsepower and MPGs. Vehicle manufacturers need to invest in ground up designs to minimize compromises and release attractive CNG vehicles. For example, VPG Autos released the MV-1 (wheelchair vehicle) that was a ground up design. The CNG version has minimal loss of cargo area. They rely on a Ford engine so they still have a loss of horsepower and MPGs.

The questions is why it hasn’t happened so far? Brazil has implemented for more than a decade and so has India – most populous countries in the world.

Why Honda Civic-G hasn’t taken off?

I strongly support this not only because of cheaper fuel or clean burn – but it also extends the vehicle life! But the other option is to stay on battery assist hybrids – because then you can use combinations to generate electricity that can change from time to time. You can use Bloom cells to convert gas to electricity or wind or solar or Coal doesn’t matter. What is more economical – practical – responsible makes its way and we don’t have to keep switching technology if all of above produce electricity and we use electric vehicles.

May be the Natural Gas was answer 10 years back – now we have to invent ahead of our 3rd world partners!

———–” While also saying that the controversial fracking techniques can be properly regulated??? Please, Obama, don’t make me laugh. The only way those gas-fracking-idiots are able to do this safely is by drilling a great big gaping hole in every safe water regulation there is. All across the country you’ve got poisoned aquifers”————-

Regarding fracking. Propane gel hydraulic fracking is non toxic, used in a closed system therefore it is completely recoverable and reusable— and is a natural component of natural gas anyway.

Propane does not use any toxic chemicals, does not use scarce water resources(important in dry climates where many